The story goes like this: One dark October day, the U.S. Treasury Secretary pulled CEOs of nine major banks into a room and forced them to accept billions and billions of dollars from the federal government.
Many of these bankers didn’t want the money. Didn’t think they needed the money. And didn’t care to shock their shareholders by taking the money.
The spend-happy Bush administration, as if eager to introduce a virulent new form of socialism, simply rammed all these freshly minted dollars right up their big, fat pneumatic tubes.
Now they’ve got taxpayers whining about executive bonuses, multimillion-dollar aircraft, posh trips to Las Vegas, dividends and stock repurchase plans. They’ve also got President Obama seeking to cap their compensation at $500,000 a year until they pay back the taxpayers.
Maybe it was a conspiracy. A sinister plot to nationalize the banks. A populist movement to curb the extravagant lifestyles of Wall Street’s financiers.
TARP, or Troubled Asset Relief Program, sounds straight out of the acronym-addled bureaucracies of the former Soviet Union, even though it came from a Republican administration.
Some bankers actually tried to maintain this bizarre myth in their testimony before the House Financial Services Committee on Wednesday.
“At the urging of the U.S. government, Bank of America accepted TARP money,” CEO Kenneth Lewis told the committee, his eyes bulging like those of a man at a 12-step meeting recounting his helplessness in the face of horrendous abuse.
“We were strongly encouraged to participate,” said Robert Kelly, CEO of Bank of New York Mellon Corp. “And we did, very quickly.”
For Wells Fargo & Co. CEO John Stumpf, it was his patriotic duty to accept this money.
“We’re Americans first, and we’re bankers second,” he told the committee. “So we see this taxpayer investment, first and foremost, as an investment in the future economic growth of our country. We’re proud to be an engine of that growth.”
Barney Frank, the Massachusetts Democrat who chairs the House committee, put a swift end to these absurdities with a generous offer.
“If you want to give back the money, we will take it,” he said. “And if there are any obstacles to your giving it back, legally, we will undo those obstacles.”
Somehow, nobody volunteered.
Alabama Republican Rep. Spencer Bachus then asked Stumpf if Wells Fargo was indeed forced to take the money, as earlier reported.
“We’ve clarified our statements,” Stumpf awkwardly replied. “We’re happy to have the money.”
As the hearing progressed, the eight big bank CEOs called to testify vowed to pay back the money as soon as possible. With any luck, by 2012.
“When it comes to Citi, you will look back on it and know it was the right decision for our nation’s economy and for American taxpayers,” said Citigroup Inc. Vikram Pandit.
Yet all of the banking executives also cautioned that such payback depended upon market conditions. If the economy worsens it could take longer. Investments are inherently risky, you see. Past performance is no guarantee
Ordinary people have a difficult time understanding this fine print.
“We recently got a letter from our Citi credit card informing us that they were raising our interest rate from 7.9 percent to 14.9 percent,” Tana Lucero of Denver wrote me in November. “So, in addition to contributing our tax dollars to pay for the blase attitudes of the gurus at the top, we also get the additional privilege of having our rates nearly doubled.
“Yea, for the little guys who pay their bills on time, maintain their credit scores, manage their money responsibly, and live within their means,” she said.
Too bad the little guys can’t stick their debts in a special investment vehicle and pretend it doesn’t exist until the whole financial world blows up and then be forced to accept a multibillion-dollar government bailout.
Michael Capuano, D-Mass., told the banking executives at the hearing that they should be criminally prosecuted for their off-the-books schemes. Not rewarded.
“I have some people in my constituency that actually robbed some of your banks,” Capuano said in one of the most brutal soliloquies of the excoriating hearing. “And they say the same thing: They’re sorry. They didn’t mean it. They won’t do it again. Just let them out. Do you understand that this is a little difficult for most of my constituents to take?
“You created the mess we’re in,” Capuano chastised. “And now you’re saying ‘Sorry. Trust us. And by the way, we don’t even want the money.’ Interesting. No one has ever come to me and said, ‘You must take billions of dollars.'”
Al Lewis: 201-938-5266
